September 2018 – Law and Civil Engineering

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Foreclosure of the Mechanics’ Lien
by Eugene Bass

Prior articles have discussed various of the functional and procedural aspects of mechanics’ liens. In particular, it should be apparent that timing and meeting deadlines is an important element of mechanics’ liens and their enforcement. It has also been shown that if timing requirements are not met, lien rights can be lost.

Although the proper recording of a mechanics’ lien and adherence to all the prerequisites can establish a valid lien, further steps must be taken within prescribed time limits to enforce the lien.

The law provides that a recorded mechanics’ lien cannot be effective for a period longer than 90 days after the date of recording unless, within that 90 day period, a lawsuit to foreclose the lien is filed in the proper court. The law also provides that if the lien claimant fails to commence an action to foreclose the lien within the statutory time limitations, the lien shall automatically become null and void and of no further force and effect.

Often lien claimants believe that once the lien has been recorded, nothing further is required. That is not true. While title companies may react very conservatively and be concerned about mechanics’ liens over 90 days old, and in some cases treat them as still valid, the lien claimant cannot rely on such a result.

When there is a payment dispute, the non paying party often begins to show more interest once a lien has been recorded. Settlement negotiations that have not moved can be prompted and the parties will begin talking more seriously about resolution of the issues. During the negotiations, the lien claimant must be particularly aware of the 90 day period for filing a lawsuit to foreclose the lien. The other party may be aware of the 90 day limit and may seek to drag the negotiations out past the 90 days and cause the lien to become invalid. Once the lien becomes invalid the bargaining position of the lien claimant can be significantly diminished and there can be less urgency in resolution of the claim.

Two options exist if the 90 day limit is approaching and no resolution of the dispute has been reached. If the period for recording liens has not expired, the lien claimant can record a new mechanic’s lien. The old lien should be released at the same time to avoid doubling of the lien amount. With the recording of a new lien, a new 90 day period will commence, thus postponing the final date for filing a lawsuit to foreclose and, hopefully, allowing time to conclude the resolution of the dispute.

The other option available to extend the period for filing a lawsuit to foreclose the mechanics’ lien beyond the 90 day period is to record a “Notice of Credit.” The notice serves as an agreement between the lien claimant and the owner to extend the foreclosure lawsuit filing period. The time period for filing the lawsuit to foreclose cannot be extended beyond one year from the date of completion of the work of improvement, however.

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